3/05/2010 @ 6:00AM

Broadband Plan Winners And Losers

Nearly two weeks remain before the U.S. Federal Communications Commission is scheduled to deliver its national broadband plan to Congress. But analysts are already picking potential winners and losers based on key themes that have already been identified, such as mobile broadband networks and spectrum swaps.

The plan’s overarching goal is to give all Americans access to affordable, high-speed broadband Internet. One FCC proposal: to deliver 100-megabit-per-second broadband service to 100 million households by 2020. The work will cost billions of dollars, including, potentially, $9 billion to bring broadband to rural homes and $12 billion to $15 billion to build a communications network for public safety services.

Greater broadband use should also boost network providers’ business–assuming they can charge enough to cover the cost of deploying the new networks, says Arbogast. That would be good news for
AT&T
,
Verizon
and
Comcast
. Smaller operators that focus on rural markets, such as Frontier Broadband and CenturyLink, may also net lucrative contracts, possibly through government grants.

Much of the new broadband will probably be in wireless form so that people can get online while on the go. Those wireless build-outs will be a boon for the country’s major wireless carriers (Verizon Wireless, AT&T,
Sprint Nextel
and T-Mobile) and the wireless Internet service provider
Clearwire
, says Arbogast.

The addition of more wireless networks will make wireless spectrum an even hotter commodity than it already is. Companies like NextWave, which holds some little-used spectrum licenses, stand to gain from the crunch because they will be able to profitably lease or transfer their spectrum, says Arbogast. The same is true for so-called MSS (mobile satellite service) providers, which have their own special spectrum licenses.

Independent application developers and
Google
, which has built a suite of wireless applications, will be rewarded by increased broadband use, too, according to Arbogast. “More broadband will trigger a virtuous cycle of more broadband use and more [interesting] applications developed,” she says.

Broadband, of course, is a means to an end rather than an end in itself. Congress wants broadband to promote social economic initiatives, such as smarter education, health care and energy conservation. Companies that devise creative ways, such as e-books, standardized medical records and smart grid technology, to marry broadband to those issues will also benefit from the FCC plan, says Arbogast.

A proposal as wide-ranging as the broadband plan also naturally creates losers. Players with “potential downside” include broadcasters, Cisco and
Motorola
, says Arbogast. Broadcasters may be asked to vacate wireless spectrum to make room for data networks. Cisco and Motorola, along with other companies that make cable set-top boxes, are worried the FCC will include new video-streaming standards in the broadband plan, says Arbogast. Such a move would help consumers share content between devices but could also disrupt a profitable market for manufacturers.

The FCC also wants to reform the universal service fund (USF), an $8 billion federal fund built from tolls paid by telecom companies. Historically, the USF has helped smaller carriers subsidize local phone service. To achieve its broadband goals, RBC’s Coleman believes the FCC will create a separate USF for broadband service or redirect the existing fund to pay for broadband deployment in “high-cost areas.” Tweaks to the USF would probably benefit the largest telcos, such as Verizon, AT&T and Sprint, since they typically pay the most to the fund, says Arbogast.

One thing is clear: The roster of broadband winners and losers is still being written. The FCC will deliver its plan to Congress on Mar. 17, but it may take months or even years to execute. “Every proposal needs some action to make it happen,” notes Arbogast. “The plan is just step one.”